Diary of my 1st Rehab Buy-and-Hold in Baltimore City
Hello BP!
Today I closed on my first buy and hold rowhome in Baltimore City. It's my first real estate deal ever - and seeing as how I only have the faintest idea of what happens next, I figured my journey of figuring it all out might come in very handy for anyone in my boat. That is:
- employed full-time
- the only "boots on the ground"
- total newbie
- very determined!
Here's the quick and dirty on the deal:
- purchased from a wholesaler on the local REIA email list
- purchased for $42K all in
- located in 21213 (Belair-Edison)
- delivered vacant
- Would like the rehab to come in under or at $30K
What I've done so far (in order):
- answered wholesaler's ad/email
- set up a showing (it was a very quick walk thru b/c tenant was there and didn't know I was coming)
- put in a cash offer over text message
- wholesaler emailed me the original contract between him and seller and an assignment contract
- chose a title company (because this wholesaler didn't insist I use his) - first verified over the phone that the title company is familiar with how wholesale deals are structured
- dropped off my $1,500 EMD deposit at the title company
- scheduled an inspection of the property through the wholesaler - this was delayed multiple time because tenant vacated later than planned and the electricity was shut off
- called BG&E to get the power turned on in my name (even though I didn't own the property yet) so that my inspector could properly check the boiler and electric system
- purchased a lockbox and left a key on the front door for BG&E to verify that the property was vacant - they most likely required this because the previous tenant had a large unpaid balance
- got a full inspection from a licensed inspector (who is also a contractor, flipper and appraiser), which took about three hours altogether and cost me $375
- Met the neighbors and gave them my phone number in case anything funky happened at the property. (Told them I was the property manager, NOT the owner.)
- wired the funds the day before closing to the title company
- went to the title company and it took about 15 minutes to sign about 5 documents
- became a real estate investor!
What the inspector found:
- structure is surprisingly sound - no damage or warping to joists, basement appears to have never taken on water, i-beams are steel, foundation is a-ok (phew!)
- electric panel is made by Federal Pacific - it is a fire and safety hazard and must be replaced by doing a panel swap ($1K - $2.5K)
- electricity in the house is ungrounded - in order to pass section 8 inspections, electric must be TRIPLE grounded. This would require rewiring the property and ripping out perfectly fine walls to do it. Costs could run as high as $10K.
- HVAC - boiler is probably from the 1940s, but still fires up like it's brand new. However only 2 of the 6 radiators are heating up. Need to call a plumber and locate the blockage.
What's next:
- changing locks on front and back door (a little late on this but I didn't perceive the previous tenants to be the vandalizing types)
- getting insurance - not sure yet whether I start out right away with a landlord policy or if I do a build policy during the rehab
- Scheduling a plumber
- Get a second quote on electric work
- Have a couple GCs scheduled to come by next week for a walk through
- Deciding if the high cost of triple grounding the electric will be worth the extra cash flow I can receive from section 8 tenant vouchers
I'll be posting regularly as I progress... feel free to ask me questions or give me advice as well!
If I can do it, you can too!
- Julie